The State Assembly passed a bill last Wednesday holding HMOs liable for any harm suffered by their clients if they are “improperly” refused coverage for necessary care.

The bill had the support of consumer groups, physicians and trial lawyers, but was strongly opposed by the HMO’s trade association.

“HMO’s currently use powerful financial incentives to limit physician’s referrals of patients for medical tests and specialists,” charged the New York Public Interest Research Group in a statement supporting the measure. Under current law, these physicians can be held liable for injuries resulting from denial of care, “even though the HMO required such denial through its utilization review practices,” NYPIRG supporters argued.

“The bill would encourage defensive medicine, with doctors prescribing unnecessary treatment in trying to avoid being liable down the road,” countered Leslie Moran of the New York HMO Conference, a trade association.

The bill’s next hurdle is in the Senate, where it is sponsored by Bronx Republican Senator Guy Velella. But supporters say it is not clear whether the Senate will consider the bill before its session closes in July.